2.1 raising finance Flashcards Preview

business a level > 2.1 raising finance > Flashcards

Flashcards in 2.1 raising finance Deck (39)
Loading flashcards...
1

what is a business plan?

- a plan for the developments of a business giving details such as the products to be made, resources needed and forecasts such as costs, revenue, cash flow

2

what does a business plan contain?

- an executive summary
- buying and production
- financial forecasts
- market
- personal
- finance

3

what are the 2 types of expenditure?

- capital expenditure
- revenue expenditure

4

what is capital expenditure?

- spending on business resources that can be used repeatedly over a period of time

5

what is revenue expenditure?

- spending on business resources that have already been consumed or will be very shortly

6

what are types of internal finance?

- owners capital
- retained profit
- sale of assets

7

what is owners capital?

- personal savings

8

what can owners capital be used for?

- start up, expansion, replacement capital

9

what are advantages of using owners capital?

- no need to repay the money
- no interest
- no cost

10

what are disadvantages of using owners capital?

- might not have much funds, will need to find another way

11

what are advantages of using sale of assets to raise finance?`

- good if the asset is no longer of use

12

what is a disadvantage of using sale of assets to raise finance?

- can take time to sell
- may affect production
- may not find a buyer

13

what are examples of external finance?

- family and friends
- banks
- peer to peer funding
- business angles
- crowd funding
- loans
- share capital
- venture capital
- overdraft
- leasing
- trade credit
- grants

14

what are advantages of using family and friends to raise finance?

- may be more flexible lenders
- longer repayment time

15

what is a disadvantage of using family and friends to raise finance?

- may damage relationship if there's any misunderstandings

16

what are business angles?

- individuals who invest smaller amounts of money into a business in return for a stake

17

what are advantages of using business angles to raise finance?

- they bring their knowledge to the business
- they are wealthy
- no repayment or interest

18

what are disadvantages of using business angles to raise finance?

- can take long to find a suitable investor
- have to give up a share of the business
- not suitable for investments over £500,000 or below £10,000

19

what is share capital?

- shares are sold on the stock market
- raising money
- buyers become shareholders and part owners

20

what are advantages of using share capital to raise finance?

- lots of finance can be raised
- money doesn't have to be payed back
- no interest is payable

21

what are disadvantages of using share capital to raise finance?

- shareholders are entitled to have a say in running the business
- the business may be taken over and existing shareholders no longer own the business

22

what is venture capital?

- an external investor looking for fast growth and return on their investments

23

what are advantages of using venture capitalists to raise finance?

- business expenditure
- additional resources
- connections

24

what are disadvantages of using venture capitalists to raise finance?

- loss of control
- loss of management could happen

25

what is an overdraft?

- allows a business to spend more than it has in its accounts

26

what are advantages of using an overdraft?

- its flexible
- quick to arrange
- interest is only payed to amount borrowed

27

what are disadvantages of using an overdraft?

- cannot be used for large borrowing
- rates of interest higher than loans
- bank can change limit at any time or ask for money sooner than expected

28

what is leasing?

- 'renting' vehicles or machinery over a period of time

29

what are advantages of using leasing?

- can spread the cost
- access to higher standard equipment
- cash flow management is easier

30

what are disadvantages of using leasing?

- can work out to be more expensive
- you don't own the equipment
- can get locked into inflexible, medium or long term agreements